Benefits by the Bulk

Can salvation from the high cost of health care be found in the land of the 20-gallon jug of pickles?

In January, the national warehouse chain Costco -- where bargain-obsessed consumers buy everything from car tires to office furniture to 100-roll packages of toilet paper -- announced that it is adding health insurance to its product list for "executive" business members in California, adding the Golden State to a list that includes Washington, Oregon, and Nevada. More states may soon follow, Costco executives say.

Costco is not the only superstore to wade into the health care market. Rival Sam's Club began selling insurance to small-business customers in 46 states last year through online broker Answer Financial. And Staples Inc. recently began doing so in partnership with AON Corp.

The idea of snatching up a health plan alongside a jumbo-size can of tuna certainly has its attractions. But don't expect rock-bottom prices. "Each company will still go through individual underwriting," says Debra Althouse, vice president of sales and service for the small-group market at PacificCare. Buying insurance through a superstore won't put your company into a larger risk pool and savings won't be huge.

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Still, every little bit can help. Insurance premiums for small companies soared 13% between 2001 and 2002, according to the Kaiser Family Foundation. Robert Pippen, manager of Steven S. Miller Management, a 45-employee property management firm in Las Vegas, switched to Costco's plan last spring, shaving his costs some 6%. "And, we got more benefits for the money, better copays, and so on," Pippen says. But Costco is promising more than lower costs. The company also claims that its large size and close relationships with insurers means it will have more clout than your typical broker should problems arise.

With more than 400 stores nationwide and some 2 million executive members, Costco at least provides another option for entrepreneurs. "But the problems that small businesses have with health insurance are way beyond what a Costco or a Sam's Club can fix," cautions Eric Parmenter, practice leader at consulting firm Grant Thornton. "It's a small Band-Aid on a large wound."